Global Medicine Spending to Pass $1 Trillion in 2014



Gerald Clarke
11/20/2013

Next year will mark a milestone in the pharmaceutical industry’s growth as drug sales will exceed $1 Trillion. This was the finding of IMS Health in their new report on the spending on pharmaceuticals and trends that will affect it between now and 2017.

Two factors will be the major drivers of this growth, increased spending on medicines in emerging markets and increased spending on new drugs for cancer and orphan diseases.

Diverging Growth Engines

In the developed world, the picture is more complicated than a simple growth story. Factors increasing spending on pharmaceuticals include the appearance of new drugs for various diseases such as cancer and an increasingly aged population. The Affordable Care Act (Obamacare) could potentially also increase pharma spending as previously uninsured people gain coverage. However some of this trend is counteracted by blockbusters dropping off patent, causing many to move to cheaper generics. Additionally the global financial crisis has caused many governments to look for areas to cut spending and as we have covered before, many of them are looking towards their medicines spend.

Emerging markets

China more than any other country will be a main driver of growth with a CAGR of 14-17% until 2017. The country aims to have total healthcare coverage of its 1.35 billion population by the year 2020 which could mean over $180 billion in growth over the 4 year period. In countries such as China, it is likely to be the increased take-up of generic medicines which will drive growth.

Biologics/new drugs

In developed nations it will be the new innovative medicines such as cancer drugs and biologics driving growth with IMS predicting that spending on specialty medicines will grow from $171 billion in 2012 to $230 billion by 2017.

Overall

For the first time in over 50 years last year, the spending on pharmaceuticals fell as many drugs fell off the patent cliff. The future predicted by IMS Health however, is cautiously optimistic; spending in developed nations will grow, just at a reduced rate. It appears that innovation on the home front and penetration into emerging markets will be the main drivers behind growth in the coming years, but a question to ask might be what about long term?

 

$1 Trillion Dollars at a Glance

Bio-Based Manufacturing $1.2 Trillion

Arms Industry $1.7 Trillion

B2C eCommerce $1.298 Trillion

GDP of Mexico $1.17 Trillion

Years required to earn $1.2 Trillion at US minimum wage ($7.25/hr) 79,500,000 years

 

By Gerald Clarke